The Plano-based retailer said it decided not to pay a $17 million interest payment on its term loan. Penney and Sephora were scheduled to battle in a Texas federal court on Friday.

Plano-based J.C. Penney said it will not make a $17 million interest payment that’s due Thursday on its senior secured term loan. Under its loan agreement, Penney has a grace period of five business days to make the payment before the company is in default.

Penney put another skirmish to bed late Thursday. The retailer was scheduled to meet Sephora in U.S. District Court in Sherman on Friday. Instead, the two companies said they “reaffirmed” their 14-year partnership to operate Sephora shops inside more than 650 Penney stores.

Penney and Sephora said in a joint press release that they resolved their legal matters and have “agreed to mutually beneficial revisions” to their joint operating agreement. They provided no details.

The skipped debt payment is part of a bigger battle for Penney.

The retailer said in a filing Thursday that it made the decision to skip the payment while it evaluates “certain strategic alternatives, none of which have been implemented at this time."

The chain of 840 department stores is approaching the end of a 30-day grace period before it’s in default on $388 million in bonds due in 2036. On April 15, Penney didn’t make a $12 million interest payment on those bonds.

“J.C. Penney made the strategic decision to not make an interest payment due on May 7 and take advantage of the grace period to continue ongoing constructive discussions with lenders and maximize financial flexibility," said Penney spokeswoman Brooke Buchanan in an email.

Most industry analysts expect that Penney will be forced to file for Chapter 11 bankruptcy soon. The company has both a debt issue — $4 billion in long-term debt — and stores in malls that have either lost their positions in suburban markets or are in smaller cities with less potential for growth.

Penney has been negotiating with its lenders since last summer, and while it was in a better position to do so then, the company has used the progress of its turnaround just before the coronavirus closed stores as a negotiating point.

The retailer has said that it met or exceeded guidance on five financial objectives for 2019 and saw comparable store sales improvement in six of eight merchandise divisions in the second half of 2019 over the first half.

First-quarter results haven’t been reported by most retailers. That usually happens in May.

Penney said it’s slowly reopening stores, 17 so far in eight states with 15 more open only for curbside pickup of online orders. Locally it has opened Fairview and Arlington and has curbside service at its Hurst store.

“We remain focused on our plan for renewal as we begin to reopen stores and offices in markets when it is safe to do so and in a phased approach,” Penney said.